WHITE PAPER SIX BENEFITS TO ADDING REGIONAL CARRIERS TO YOUR DELIVERY NETWORK

Transcription

1 WHITE PAPER SIX BENEFITS TO ADDING REGIONAL CARRIERS TO YOUR DELIVERY NETWORK

2 Today s shippers face complicated challenges in coming up with costeffective ways to meet rapidly evolving customer service demands. The power of the Internet has placed tremendous power into the hands of online buyers, who are likely to choose a vendor for perks such as free shipping, same day delivery and easy return programs. Those shippers who can meet these growing delivery demands have a huge advantage over their competition. A recent study by Accenture found that Eighty percent of retailers see a positive and measurable impact on customer satisfaction by offering multiple delivery options to shoppers. 1 Regional carriers are getting more attention from companies of all sizes and industry sectors. When Walmart, for example, began testing a two-day shipping subscription to compete with Amazon, it added regional carriers to deliver more of its packages. 2 Other companies such as Best Buy have added regional carriers to control costs while offering online shoppers faster delivery times on orders. Smaller online retailers such as Legendary Whitetails are also using regional carriers to avoid paying a premium for fast shipping during peak holiday shipping seasons. How do regional carriers add up when compared to national carriers? As experienced shippers will tell you, regional carriers can be the key to faster, cheaper and more flexible delivery services. By adding regional carriers to cover specific regions of their delivery network, they re able to lower overall transportation costs and offer a broader choice of shipping options to their customers. On the following pages, you ll find tips on what to expect from regional carriers and how you can use them to build an elastic fulfillment network that helps control costs while adapting your services to your customers changing delivery preferences. Characteristics of Regional Carriers Regional carriers can be categorized in many ways. Some focus on small parcel delivery, while others also offer less-than-truckload (LTL) services for heavier shipping. Certain regional carriers provide multi-state solutions, while others are couriers or micro-regionals that cover smaller geographic regions such as cities or partial states. 3 Some carriers handle both business-to-business and businessto-consumer deliveries; while others specialize in certain industry sectors. Carriers such as LaserShip, for example, have built their business by focusing on the last mile and time sensitive deliveries up and down the U.S. East Coast from Miami to Maine. By building their operations in this way, they ve gained the ability to excel in a specific niche while keeping tight control over operating costs. This strategy allows them to customize their services in ways that national carriers cannot always readily match. As Rick Jones, president of regional carrier LSO and a 20-year veteran of UPS and UPS Supply Chain Solutions noted, A regional carrier can do things like extend pickup windows for certain customers to 9 p.m. or 10 p.m. and still have a huge overnight reach because they don t have to worry about getting something to Osaka, Japan or Cologne, Germany like UPS or FedEx have to. All carriers must operate their networks based on their farthest points, but since a regional carrier s farthest points are much closer than UPS or FedEx, it allows them to pick up 2, 3 or even 4 hours later. These later pickup times 1 New Delivery Trends Impacting Postal and Parcel Transformation, Accenture, Walmart Tests Two-Day Shipping, Tapping Regional Carriers, Food Logistics, May 2, Kent Szalla, Regional Parcel Carriers: A Historical Perspective, Parcel Industry, May/June Logistyx White Paper: Six Benefits to Adding Regional Carriers to Your Delivery Network 2

3 in turn enable shippers to open their order and fulfillment windows to take customer orders later, creating competitive advantage and increased customer satisfaction. This approach of focusing within a certain geographic region and/or business specialty can translate into a winning advantage for shippers who leverage the strength of a regional carrier s network. For example, a medical equipment manufacturer approached LaserShip to see if the carrier could gain a service advantage over its competitors by reducing its average 5-to-6 day transit time on orders going from Florida to New England. We were able to help this shipper by providing a later pick up time and by injecting their packages directly into one of our regional sort facilities, said Tom Mara, Director of Sales for LaserShip, This shaved one to two days off their transit times. In addition to the faster delivery, we were able to extend a rate that achieved a cost savings. In addition to their flexibility to customize their operations, regional carriers offer a number of other advantages. Following are six benefits they can offer to shippers. Lower freight rates. Most regional carriers transport packages via truck hubs, which can be operated at a much lower cost than airfreight operations. As a result, regionals can often pass along savings of 10% to 40% over UPS and FedEx pricing to their customers. Fewer surcharges. Many regional carriers also do not assess the same delivery surcharges charged by national carriers. For example, regional carriers may not charge for rural deliveries while national carrier charges can range from $1.85 to $3.00 per package based on rural zip codes. Other regionals may not add a surcharge for weekend deliveries. Calculated over a year s worth of shipments, the elimination of such surcharges can add up to thousands of dollars in savings. Holiday delivery surcharges also vary by carrier. On June, 17, 2017, UPS announced that it will be adding a new surcharge of 27 cents a package for all ground shipments to homes sent between Nov. 19 and Dec. 2, which includes some of the busiest online shopping days. 4 For companies that experience their highest shipping peaks during this period, it may be wise to consider adding regionals to handle some of the volume to control costs. Faster delivery for a lower cost. Regional carriers may also be able to offer faster times-in-transit at a lower cost than national carrier rates. This can be a huge advantage for shippers with customer densities in certain geographic regions. For example, an online retailer in California with a high density of customers in metropolitan New York can save time and cut costs by using an LTL carrier or airline to deliver its orders to a NY based regional carrier who then makes the last leg of the delivery to the customer. Savings can be as much as 40% without any loss of delivery time, says Rob Shirley, president/founder of Austin, TX-based shipping solutions consultancy ExpresShip. 5 Efficiencies like this can help companies grow revenues by wooing new customers away from their competitors. Responsive service. Regional carriers may be willing to take on special shipping requirements and have more flexibility in terms of the kinds of services they can offer because they re not required to standardize their services to accommodate a broader network as national carriers are. They may be in a better position to move certain kinds of products that require special handling, for example, or be in a better position to respond more quickly to service inquiries. 4 Paul Ziobro, UPS to Add Delivery Surcharges for Holiday Orders -- 2nd Update, Fox Business News, June 19, William Atkinson, Close to Home, Multichannel Merchant, December 1, Logistyx White Paper: Six Benefits to Adding Regional Carriers to Your Delivery Network 3

4 Many shippers place a premium on these kinds of responsive services. As a recent Multichannel Merchant article noted, Getting the nationals to be flexible can be a frustrating experience even for multi-million dollar shippers. Merchants that make the switch to regionals often see a greater degree of customer service and accommodation. As one shipper noted, After getting very little attention from the national carriers, I now feel like a big fish in a small pond with my regional carrier. 6 Responsive service is so important to shippers that carriers like LSO treat it as a top priority. Customers like to know they re going to reach a live person on the phone when they call in, so we make sure that any customer that calls in reaches a live person, not an auto attendant, Jones said. Equally important, our customer service people are well educated in our operations. They can call right down to the driver level and find out what is going on, if necessary. Lower damage rates. Regional carriers may also offer another advantage in terms of lower damage rates on customer shipments, a prime concern among shippers trying to woo customers for repeat business. Some of this may be attributed to a mindfulness to minimize damage on shipments, but it may also be related to the regional carrier s operational characteristics. Regional carriers operate more in a point-to-point operations environment. They also strive to consolidate as much as they can at the origin to reduce handles in transit, and also tend not to utilize large central sorting facilities with heavy mechanization, said Jones of LSO. All of that correlates to less wear and tear on the packages. A more direct route and less handling definitely translates into fewer damages. According to Jones, LSO s damage rate is about 1/30 of the industry average when equated to a percentage of revenue. Improved negotiating power. Adding regional carriers to the mix places shippers in a better position to negotiate more competitive contracts with their national carriers. In fact, according to Ben Huffman, Vice President of Operations for online retailer Legendary Whitetails, this multi-carrier approach has delivered immediate payback in carrier negotiations. Huffman keeps a close eye on shipping volumes and carrier charges and uses the data to show all his carriers, regional and national, where they rank and what they need to do to win more business. When you re dealing with an arbitrage rate shopping system, it s fairly cut and dried as to who is going to deliver the package, he said, If you can compare similar service levels between carriers, you force them to compete on price and get creative, so they come to the table with their best rate. Decision Criteria in Choosing Regional Carriers Numerous benefits can be gained by adding regional carriers to your portfolio, but it takes the right alignment of the carrier s services to the shipper s specific needs and the right shipping system technology to yield measurable benefits. To derive the best results, consider the following: 1. View regional carriers as a complementary, not competitive solution If you take this approach, you ll uncover new opportunities that result in a win-win for you and your customers. Some shippers hesitate to consider regional carriers, largely because they are more accustomed to the delivery programs offered by large national or global carriers such as UPS and FedEx. But regional carriers themselves are quick to note that they view themselves as complementary rather than competitive solutions for national carriers. National carriers like FedEx and UPS play an important role in helping many shippers manage their delivery networks and we certainly don t operate 6 Rob Martinez, A Look at Regional Parcel Carriers, Multichannel Merchant, April 1, Logistyx White Paper: Six Benefits to Adding Regional Carriers to Your Delivery Network 4

5 on the belief that we re here to replace them, said Mara, But in certain situations, we can offer a very competitive solution that may also address service needs that national carriers cannot accommodate. 2. Take a broader view, beyond lowering freight rates Freight experts like Jones and Mara, who ve witnessed dramatic changes in the shipping industry over the past 15 years, will quickly advise you to think about the bigger picture. Rather than entering into carrier discussions with a focus on lower freight rates, think instead about questions such as: What business problems are causing the biggest pain points in your delivery network today? What are the top three things that you d change about your carrier services? What customer service issues are top of mind for your customers and how are they affecting your business? Are there delivery services that you could add that would positively impact your company s ability to attract and retain new customers? If you sit down with your carriers with these questions in mind, you ll likely come up with ideas and solutions that can transform your business. 3. Don t underestimate the value of data analysis The best results are achieved when you base your decisions on a comparison of current shipping processes versus new potential delivery methods. This takes data analysis. There is no one size fits all approach to getting this done. However, if your system accommodates regional carriers, you may be able to easily add a new carrier and perform a cost-comparison based on historical shipping orders. Douglas Kahl, director of sales and business development for AFMS Logistics Management Group, suggests pulling all the pricing information you gather into a database format or spreadsheet format. Then pull out as much information as you can, down to the package level, from your shipping system and any electronic invoicing information that you have. This will provide you with the costs associated with your current carrier, he explains. Then you can compare this to the cost of a potential regional carrier. 7 If you lack the resources to perform the analysis, the regional carriers themselves may be able to help. As Mara of LaserShip advises, If you can give us some historical shipping data to work with, our team will provide a detailed analysis that highlights where you can capitalize on new services. That s the best way to determine the actual benefits you ll realize. 4. Analyze your customer map You can uncover significant cost savings by employing zone skipping and or pool point programs. In areas of higher customer concentration, it may make more sense to use less-than-truckload carriers in conjunction with regional carriers. For example, a shipper in St. Louis could take all its West Coast-bound shipments via LTL trucking to OnTrac s hub in Reno, NV, and receive three- to four-day transit from the Canadian border to the 7 William Atkinson, Close to Home, Multichannel Merchant, December 1, Logistyx White Paper: Six Benefits to Adding Regional Carriers to Your Delivery Network 5

6 Mexican border (Bellingham, WA, all the way down to Yuma, AZ). From Reno, that s guaranteed next day delivery at Ground rates to a population of 50 million consumers Consider realigning your distribution network In addition to comparing actual shipping costs in your existing network, what savings could be gained by shifting distribution points in your network? It s definitely worthwhile to compare your existing options with those added by a regional carrier. 6. Explore super regional networks as a broader delivery option You may also consider the benefits of using a super-regional network, a program that enables shippers to take advantage of multiple regional carriers competitive shipping rates and flexible services over a broader geographical range. This makes it possible to utilize regionals carriers for options such as coast-to-coast coverage in an arrangement that is transparent to customers. The carriers use a regional parcel alliance, modeled in a similar way to recent LTL regional alliances, using a standard technology platform to control package custody from one carrier to another and transmit online package status data to customers. One such regional alliance is being formed between Eastern Connection, OnTrac, SpeeDee, LSO, TransTek and U.S. Cargo. Any of these companies can provide additional information on the alliance Avoid volume commitments If your current contract includes a guaranteed volume of business with your existing carriers, you may or may not incur a price increase by diverting some of that volume to regional carriers. Build this consideration into your analysis and into your next contract negotiations. In the long run, volume commitments may prevent you from allocating a portion of your shipments to a more cost-effective and efficient carrier, preventing you from optimizing your supply chain to the fullest extent possible. 8. Leverage multi-carrier shipping technology Some shippers are hesitant to take on additional carriers because of a perception that it will result in additional work for the warehouse staff. In reality, the decision to add new carriers to your delivery network need not be an arduous process, particularly if you re using a multi-carrier shipping system that already accommodates regional carriers. Some systems, such as the Logistyx Ship-IT multi-carrier shipping system include an extensive carrier library that includes dozens of regional carriers, making it much easier and faster to add the carrier s rates and services to your operations. Additionally, the Ship-IT system allows shippers to embed their shipment processing rules into the system so that carrier selection decisions can be as automated as desired. Many companies configure Ship-IT to select carriers and services based on their internal shipping rules as well as their customers shipping preferences. Once the carrier is determined, the system automatically generates the right carrier compliant labels. As a result, shipments routed via regional carriers are handled as quickly and efficiently as those routed via national carriers. 8 Rob Martinez, A Look at Regional Parcel Carriers, Multichannel Merchant, April 1, Rob Martinez. Logistyx White Paper: Six Benefits to Adding Regional Carriers to Your Delivery Network 6

7 9. Do your diligence In addition to ensuring that a regional carrier can meet your service requirements, make sure you evaluate on the company as a whole. How long has it been in operation? Is the company financially stable? Does it offer the same kinds of value-added services and technology capabilities offered by your other carriers? Does it have relationships with other regional carriers that would allow you to move your shipments through a broader network? Can the carrier provide references? The Bottom Line: Choose Carriers Who Will Treat Your Business as Carefully as You Do If Jones and Mara have any advice for shippers, it s this: choose carriers who are willing to sit down with you and really dig in to understand what your priorities are. The best regional carriers treat their small-to-medium business customers needs as seriously as they do their large shippers, said Jones. They get that they re not just moving a box, for the company they re helping them use alternative delivery options as an edge to win business over their larger competitors. Good carriers also focus on making it easy for shippers to do business with them. If a customer has a question, we make sure they don t have to work hard to get answers, said Mara. We strive to keep it simple through all our business dealing. A case in point our standard contract is just five pages long, including our rate tables, which is much simpler than the 30 page contracts shippers expect to see. Beyond that, if our customer has a question, we re just a phone call away. The other key to keeping it simple is having the right technology to allow shippers to easily add and manage regional carriers in their network. Shippers may think it will be a lot of extra work for their staff to take on new carriers, but it doesn t have to be, noted Jones. If the company is using flexible multi-carrier software, they can count on the system to handle all the rating, routing and document and label generation. The next step is to simply allocate space for the new carrier to pick up their day s work. Need Advice? If you have questions or need guidance in evaluating regional carriers for your distribution network, Logistyx Technologies can help. Please contact us today to speak with a logistics specialist. Thank You to Our Contributing Experts Logistyx Technologies would like to thank Rick Jones, President of LSO, and Tom Mara, Director of Sales for LaserShip, for their contributions to this paper. LSO and LaserShip are available in ADSI s carrier library. About Logistyx Technologies Logistyx Technologies, LLC, is an industry-leading provider of flexible logistics management solutions for manufacturers, distributors, corporate campuses, online retailers, third party logistics providers (3PLs) and others. Logistyx shipping solutions can help you streamline shipping operations, achieve greater control over operating costs and increase customer service. Shipping management has never been easier. Our software solutions are highly configurable to suit a wide range of warehouse operations. We also offer comprehensive integration services. Contact us at (877) or send an to info@logistyx.com today. Logistyx White Paper: Six Benefits to Adding Regional Carriers to Your Delivery Network 7

8 ABOUT LOGISTYX Logistyx Technologies optimizes businesses transportation management execution with industry-leading software, hardware and knowledge. This unique, comprehensive package offers a configurable solution for smarter shipping anywhere by leveraging a multi-national carrier network and predictive analytics for data- and value-driven decisions. info@logistyx.com Logistyx Technologies, LLC. All rights reserved.